The Chinese equity market overtakes the European stock market in the final stretch of the year thanks, in large part, to the stimulus policies promised from Beijing to revive the national economy and encourage the return of capital to the country’s financial markets. The main stock index rises almost 20% in 2024 and doubles the European market in the same period, since investors find in the last months of this year greater incentives outside the stock market of the Old Continent.
As Wall Street’s main indices continue to record new all-time highs, the European Stoxx 600 rises 8.8% since the first of January. The European stock market, with this selective as a reference, reached its all-time highs last September at 528 points. However, it lagged behind other global equity benchmarks.
On those same dates, Xi Jinping’s government presented to the market its first measures aimed at regaining investor confidence with a stimulus package focused on revitalizing the market of the country’s securities and support the national financial sector. This translated into the massive purchase of Chinese assets that led the Hang Seng to exceed 23,090 points, which implied a 35% rise in the year in euros (in Chinese yuan the rise would be 37%). They were not the last measures announced by the authorities of the Asian giant to encourage the return of investors.
In fact, Xi Jinping promised this weekend more support to alleviate the debt situation of several municipalities and regions. Deutsche Bank estimates the package aimed at easing the financial burden of local governments at 10 trillion yuan, but without special items focused on revitalizing local consumption, according to the investment bank. In fact, several firms consider that these stimulus packages will have no real impact without aid expressly aimed at encourage national consumption. “China is already on the verge of debt deflation, that is, of japanizationbut clings to minimal reactive stimulus policies, with an ideological refusal to apply policies that could stimulate consumer spending,” commented Carmignac’s chief economist, Raphaël Gallardo.
Although expectations for the Chinese economy for the coming months do not improve, since September the Stoxx 600 has found greater determination to continue its rise. The electoral result in the United States and the tariff policies that come with Donald Trump’s victory will bring a tariff war that will affect both Europe and China. However, growth expectations in countries such as Germany or France do not anticipate a favorable 2025 either for the eurozone as a whole. And the political uncertainty in both economies does not clear investors’ doubts either. “Political uncertainty hangs over the eurozone’s two largest economies, leaving the bloc ill-prepared to confront a more assertive US administration,” explained Karsten Junius, chief economist at J. Safra Sarasin Sustainable AM.
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